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Big Shake-Up in the Sales Tax Industry

author photo of Robert Dumas

There’s been a recent announcement in the sales tax industry that I’d be remiss if I didn’t mention it here.  Just this week Thomson Reuters announced a pending sale of their Indirect Tax Managed Service business to KPMG. 

This may not seem like big news, but in the sales tax outsourcing arena, it doesn’t get much bigger than this.  Thomson Reuters was/is the largest sales tax outsourcing provider in the country.  Their decision to sell this business will have huge ramifications throughout the sales tax industry.  The move expands KPMG’s footprint in sales tax outsourcing that was largely initiated by their previous acquisition of Alternadev several years back.

These are two 800-lb gorillas….one deciding to vacate the space and the other deciding to invest.  The reasons?  Not clear at this point.  Perhaps Thomson Reuters’ desire to focus on their core software business is driving things from their side.  KPMG’s desire to have closer relationships with many of the largest businesses in the country may be the driving force for them.  I have some additional thoughts but I believe I’m too close to the situation to comment – the core business that is being sold is the former Tax Partners business that I started in 1998 and sold to, what was then, The Thomson Corporation in 2005.

Curious how you see this impacting the sales tax industry.  Comments?

Other recent “Sales Tax Outsourcing” posts by Robert Dumas:

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Comments

16 Responses to Big Shake-Up in the Sales Tax Industry

  • Posted by Insider on November 12, 2011 1:21am:

    My bet, is that KPMG bought it for the customer base and fully intends to dump the employees as well as the system you built and offer a take it or leave it to the customers who will have nowhere else to go.
    All the major telecoms use TR, and some they don't even charge fees. This is because they can list the customer as a reference. The business model in such case was to float the millions of dollars monthly tax and make the interest on overnight rates. This model works when interest rates are high and most jurisdictions allow mail in tax returns.
    Currently overnight interest rates are low and more and more jurisdictions force wire transfers. Mailing checks with postmarked dates while you sit on the customers money making the interest is no longer a viable
    business model.

  • Posted by Marc on October 26, 2011 8:45am:

    Robert,
    Are you saying it was only the former Tax Partners group bought by KPMG or the whole outsource customer base?
    thanks
    Marc

  • Posted by John on October 26, 2011 12:19am:

    I will just keep beating the drum that once again it looks like we are seeing US jobs going somewhere else.

    • Posted by Anon on October 27, 2011 11:27pm:

      John - as someone involved in this process, jobs are not going elsewhere. All US members will maintain status quo. I wish I could elaborate more but the deal has not been completed.

      • Posted by Observer on November 12, 2011 1:33am:

        Anon, you are delusional.
        The jobs will disappear and it will be sudden and without warning, until you look back and wonder why you didn't see it coming.
        Read the signs:
        TR starts outsourcing TR Sales and use jobs to Indian teams.(see TR job listings in Hyderbad)
        KPMG is named as a OneSource reseller.(google)
        KPMG buys TR.(google)
        KPMG announces TR treasury will be axed.
        KPMG hires all TR tax employees with bonuses so they won't quit until KPMG has everything in place.(just a hunch)
        Next....
        KPMG announces shutdown of OneSource and transfer of customers(take it or leave it) to their outsourced offshore operation.

        • Posted by onlooker on November 13, 2011 1:37pm:

          Observer,
          You were correct in your statements although KPMG did not provide bonuses to current TR employees. They were all brought on with there current TR salaries. Since TR had no educational/certification requirements for upper management, KPMG has given TR managers 3 years to obtain the necessary credentials. This is an impossible feat. It is a known fact that TR management team were put in place without education or certifications. There isnt a degree among the lot of them. Let's see where they land when the dust settles.

  • Posted by Caitlin on October 24, 2011 6:18am:

    I have head about this purchase a few times now. My tax director is looking for news article to gain more information about this sale, but I can not find a thing. How did you find out about the sale?

  • Posted by Elizabeth on October 24, 2011 6:11am:

    Very interesting indeed! As far as the payments go, my understanding is that KPMG uses a third party provider to cut their checks. The last I heard they were also using a third party in India to offshore their sales and use tax return compliance.
    It will be very interesting to see what shakes out from this huge development in this space. If they are trying to keep everything status quo and same teams in place, they are going to have some very large transition obstacles as tax payment processing causes an attest firm to lose independence. And based on our narrow definition when I worked at Deloitte, that's not the only regular service generally provided with outsourcing that causes independence issues.

  • Posted by Richard on October 24, 2011 4:33am:

    This truly is huge news for this space, and the comments on this board are very much on target with what I've heard. Seems to me the big question, based on my understanding and these posts, is how KPMG is actually going to file the returns and make payments for these clients. Without an internal payment processing function, KPMG needs some time to set these things up and sales tax returns are due every month. Should get interesting as preparing a return is great but meaningless without the return/data and payment actually being submitted. I'd be worried if I was a current Thomson/TaxPartners client and how this will be done hadn't been communicated to me yet.

  • Posted by Traci on October 23, 2011 9:49am:

    Hopefully this will allow other sales tax compliance firms to gain new clients as current Thomson Reuters clients choose not to go with KPMG. The Thomson model's focus on a systems approach to sales tax compliance was disasterous. The work must be more hands on in order to truly serve the customer. I can't see a big machine like KPMG being any different.

    • Posted by John on October 23, 2011 11:12pm:

      Tracy, hopefully the goal of keeping jobs in the US will play some role in the minds of the decision makers as they figure out who will do their compliance.

  • Posted by Kevin on October 21, 2011 11:10am:

    My personal experience with sales tax outsourcing was a disaster. When I was hired, the sales tax function was outsourced. I quickly learned that the outsourcing had replaced the sales tax department but they weren't aware or that. Nobody was monitoring tax rate changes, taxability changes, new product offerings. Sales data prepared for auditors didn't sync with returns and neither parties could figure out the difference. Just saying, outsourcing sales tax function really replaces the easiest and least time consuming part of sales tax compliance in an automated system. Just my opinion.

    • Posted by Author photo of Robert DumasRobert Dumas on October 22, 2011 12:33am:

      Good comments Kevin. I've definitely seen situations where companies have outsourced their compliance process to a return preparation provider...thinking they were getting more. There's a lot more to sales tax compliance than preparing returns as you recognize. Not sure if you saw my previous post regarding the proper alignment with your outsourcing provider. Some outsourced providers are return prep shops others act as an outsourced sales tax department...monitoring all those items you reference. My guess is that the company you worked for hired a return prep shop.

  • Posted by John on October 20, 2011 11:54pm:

    That is interesting Robert. Thanks for posting this. My big question is where will the compliance be done. I imagine that the service is the actual filing of the returns. I know KPMG has a large income tax outsourcing operation where compliance is done outside the US. Was the compliance done by Thompson done in the US or was it done someplace like India, because knowing KPMG, they may be planning to have the work done outside the US.

    • Posted by Author photo of Robert DumasRobert Dumas on October 21, 2011 12:54am:

      John - My understanding is that they will minimize changes to the process during the transition. The exception is likely to be the treasury piece where KPMG has traditionally used a third party payment processor. Last I heard, most of Thomson’s processes were domestic.

  • Posted by Any on October 20, 2011 9:47pm:

    TR had driven it into the ground, good to see it get new life.

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